What is it?

There are various kinds of life insurance. The principle for each variation is the same. If you die, your dependents will receive a sum of money in compensation.

This money acts as a necessary replacement for your earning power ie for your family if you're the breadwinner, or for childcare costs if you're the main childcarer.

The most typical type of life insurance is usually referred to as "term cover". We outline what this is below.

As and when you come across other types of life insurance, exactly how they work would be explained by the life insurance companies who had dreamt them up.

Who needs Life Insurance?

You should only consider getting life insurance if you have children or others who are very reliant on you bringing home the bacon.

If you're single why you should bother?

Unless you've got dependents or another good reason to have life insurance, perhaps for business reasons, you should think twice about paying good money for it.

However, you may want to think of other currently unforseen dependents.

For example, you may be the only child of parents who would eventually be relying on you for help in their old age. (In this case you could arrange some kind of cover for their long term care in the event of your death, rather than straight life insurance).

Be wary. Life insurance is one of the few remaining ways for IFAs and brokers to make very big commisions. So don't be surprised if it's recommended to you.

Summary of Level Term Insurance

The real name for it is actually Level Term Assurance but we'll call it insurance here to keep things simple.

Here's how it works:

At the outset, you decide on an amount to be covered for - the sum insured - and how long you want it to last - the term.

The sum insured stays constant throughout the term ie "level term".

Term plans have no investment content.

The sum insured would be paid out if you died during the term.

Term plans can either be set up as a single life plan - ie insuring one life - or a Joint life plan, where the sum insured is payable on the first death.

Critical Illness Insurance can be added to most plans. Usually the benefit is paid on either death or a critical illness whichever should occur first.

Terminal Illness benefit is usually payable on most policies during the term of the policy. This would usually exclude the last 18 months of the policy term.

As soon as the sum insured is paid out, the plan ends.

If you survive the term and the sum insured has not been payable then the life insurance policy ends. Nothing is paid out.

Read On

What is life insurance?

Who needs Life Insurance?

Who provides life insurance?

Types of life insurance

How much does life insurance cost?

Tips / Do's and don'ts for getting life insurance

Summary of Level Term Insurance Policies